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Bulletin / Counting the cost...

Counting the cost of the riots

Author: Charlie Maclean-Bristol

I saw this headline on the on line version of The Telegraph today (24th August) “UK retailers lost 30,000 trading hours due to riots” which they say equates to upwards of 1,250 trading days lost.

When we are carrying out the business impact analysis stage of the business continuity lifecycle we are always trying to find calculations of how to estimate how much money we could lose dueto a business continuity incident. If we know now many trading days we could possibly lose to an incident then we can start to calculate the cost of a disaster. If we know that it will take 3 months to recover and we usually take £1000 a day then we know that an incident could potentially cost us £90,000 in lost revenue. We can then look at the cost of different strategies and reduce the loss to an acceptable level. 

Unfortunately this calculation of loss is not always that simple as there are a number of factors you have to take into account. If your customer cannot buy from you today, as your business is not operating, will they wait until your business is up and going to will they spend their money with a different business which perhaps sells the same goods or services. If your service is unique or you have very loyal customers they might wait until you are up and trading again. If you sell generic goods such as MP3 players over the web, most customers know they can just go onto a rival’s site and get exactly the same item often at exactly the same price as you are selling it. If you have loyal customers they may wait some time for you to get up and going but there will be a time when they defect to your rival as they need the good or service. Once you have lost the customer, even if they were loyal in the past, they will be very hard to get back. 

When you are carrying out your business impact analysis there is no substitute for really understanding the organisation and trying to understand the real cost of an incident. Business continuity is described as an art as well as a science. We can use science to calculate the lost trading days but to calculate the actual cost is not so precise and is an art!

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